Perfect Labor Storm 2.0 is a blog that highlights workforce trends, demographic shifts, and human resources changes that will change the way employers do business.

June 07, 2011

By most accounts, the nation has weathered the worst economic downtown since The Great Depression. But mere survival just won't be good enough this time around to transform our workforce back to greatness.

It’s no secret that our recovery has been hampered by slow job growth. Our economy thrives when we people have good jobs with good wages. These wages are used to buy more things which puts more people back to work. The more demand for products and services, the more jobs we create. The economy grows when we provide a world class education to the next generations of innovators and inventors, who then become entrepreneurs, artists, scientists and thinkers that create new jobs. The problem this time is that we haven’t created enough new jobs fast enough, at least jobs that are based in the U.S.

Slow job creation however is just part of the problem. A much more significant cause is a shift in the nature of work and type of jobs being created. Even when jobs created in 2011 have the same title as those created in 1991, the skill requirements are drastically different. According to consulting giant McKinsey & Co., nearly 85% of new jobs created between 1998 and 2006 involved complex "knowledge work" like problem-solving and sculpting corporate strategy. That scenario has scripted a dramatic gap in the workplace between candidates seeking jobs and their qualifications required to fill them.

To make my point, a friend of my wife recently lost her job. She worked in banking and the mortgage business for nearly 30 years. You couldn’t ask for a more conscientious, honest, hard-working person. Her next employer would get an employee of the highest character, if that’s all the counted. But Betty (not her real name) lacked the skills most employers require these days. Unfortunately Betty didn’t recognize the skill gap. When I asked her to describe her computer skills, she proudly shared she was “really good with Quickbooks and email.” But when I asked her about her proficiency with Word and Excel, she responded, “I’m really just too old to learn that stuff. That’s for younger people.”

And that’s the problem. Computer skills – which today accounts for so much more than checking email and typing letters – aren’t just skills you can pass off onto “young people.” Every worker - regardless of age - needs them along with minimum levels of proficiency with software and Internet skills. Employees also need the ability to adapt, collaborate, think critically, and even work virtually. Unfortunately the labor pool is filled with a lot of job seekers named Betty.

To learn more about how this job restructuring is impacting our recovery and shaping the Future of Work, let’s begin by describing a few terms associated with the nature of work:

Transformational: Jobs that involve the extraction of raw material and converting them into finished goods. Examples of transformational jobs are mining coal, running heavy machinery, or production line workers. Once the type of job that defined progress and a robust economy, only 15% of American workers took jobs in this category by the turn of the 21st century.

Transactional: Jobs that involve routine interactions. Examples of transactional jobs would be cashiers, office and accounting clerks. Most of these jobs have become commodities and if not already outsourced, they’ve become automated.

Tacit: Jobs that involve more complex interactions – knowledge jobs. Examples of jobs in this category would include Executive/Manager, Nurse, Salespeople, and Mediators. Many experts would even include positions like customer service representatives. Today even the CSR requires a vast knowledge base and advanced skills to service a diverse population who present complex problems.

For many years, companies have followed the Alfred Sloan pyramid style of business: a limited amount of tacit type of workers at the top supported by a large base of transformational and transactional types of workers. This organizational model just isn’t working anymore. A new global marketplace demands an increase in the tacit workforce. It demands a new way of thinking. No one is going to pay workers anymore just to show up.

Or as Edward Gordon, author of “Winning the Global Talent Showdown” explains it , “we only have 20% to 25% of the current workforce that fits into jobs that are in high demand right now…” Gordon describes this as, “An abundance of labor, and poverty of talent.”

In other words, despite high unemployment rates, the U.S. does not have enough people with the right skills to fill the jobs that are being created. We do however have an ample supply of people ready, willing, and able to fill jobs that are or should be obsolete. That gap between job openings and skilled workers will keep unemployment high even if job creation ramps up.

Obviously there are some jobs too, especially in healthcare, hospitality and construction, that just can’t be done “long-distance.” But many jobs can be performed completely or to a significant degree from an offsite or remote location.

Most interoffice communications are already handled via phone, email, and text messaging. Meetings, trainings or seminars can be conducted remotely via the internet using meeting software as long as attendees have an internet connection and a phone. With the increasing popularity of smartphones and tablets, attending a web-based meeting has also never been easier. For those companies with deeper pockets and more complex requirements, video conferencing is also an option.

Documents and data can all be stored and accessed “in the cloud” – a workspace accessible via the internet, which allows for project collaboration by co-workers and a centralized repository for frequently accessed information including documents and schedules. Google Apps and Microsoft Sharepoint are just too efficient but inexpensive solutions for small business.

There are also a number of advantages to the employer and the employee.

The employer might avoid leasing a larger workspace to accommodate a growing workforce. Some businesses might even be able downsize. (Success Performance Solutions is a perfect example of how a small business can go virtual.)

Utility and other overhead costs may also be reduced. In addition to eliminating our lease costs, our phone costs were cut by one-third. Electric and heating costs went to zero.

Storing and sending documents and memos in electronic versions only can reduce office supply costs.

If the employer provides paid parking or reimburses for using public transportation, they may be able to cut back on the number of spaces they supply.

Time previously lost in long commutes to and from the office, traffic, or bad weather can be used for work increasing efficiency, or for employees to enjoy a little more balance in their lives.

Going virtual however isn’t without its problems. There are a few logistical items to consider:

Will the employer need to provide equipment to the remote employees or reimburse them for phone, utility, and internet services?

Will the employer provide insurance to cover that equipment since it is not located at the brick-and-mortar office?

Virtual employees don’t excuse an employer from paying taxes. In fact, there is another layer of complexity added if the employee is a resident of a state different from that of the employer. Workers Compensation policies and Business Operating Policies may need to be secured for each state where the employee resides.

Income taxes differ from state to state and reconciling the taxes at the end of the year for more than one state can be a daunting task even for the accounting-minded. Using a knowledgeable accounting or bookkeeping service to handle payroll can save employers a lot of trouble and minimize risk.

Health insurance may also be affected if the employees are residents of another state.

And I’d be remiss if I didn’t mention hiring the right people. Working virtually requires discipline, trust, accountability, ability to work independently, and a strong work ethic. The candidate or current employee must have the right personality to work offsite, unsupervised, and with limited contact to other people.

For some positions, for some employees, and for some companies, the virtual office is a viable solution to hiring the right people with the right skills.

April 20, 2011

You would think that a headline screaming “Percent Working Lowest Since ‘83” would blame the recession, President Obama, or Congress. To many people, it would make sense. Someone has to take the fall. There was no reason to read further.

Unfortunately the headline does not tell the real story. So in the words of Paul Harvey, “here’s the rest of the story.”

While no one could argue that part of the reason for only 45.4 percent of Americans working in 2010 was the recession, the loss of jobs since 2007 only accelerated what many anticipated would happen regardless of the economy (including yours truly) – an overall decline in the percentage of working adults to dependents. Had employers, bureaucrats, and politicians paid the slightest bit of attention, this USA Today front page headline would be a mere footnote. The real truth is that the headline and story could have been written 20 years ago when this event was first predicted.

For example, the current percentage of Baby Boomers to U.S. population is 13 percent. By 2030, the number increases to over 20 percent of the population with 71 million people aged 65 or older. While Baby Boomers will work longer, they will work less … and collect Social Security and use Medicare. Eventually all Baby Boomers will become dependent on the working age population.

Since 1900, the number of older adults has increased eleven-fold, from 3.1 million in 1900 to 35 million in 2000. In 2010 one of every five employees was aged 55 or older. By the middle 21st century, there will be more seniors than children. That statistical milestone is less than 40 years away.

The statistics alone may be startling but a picture is worth a thousand numbers! In my book The Perfect Labor Storm 2.0 and hundreds of presentations about it, I use a population pyramid so demonstrate what’s happening to our workforce and why I’m shocked anyone continues to be surprised at headlines like the one published in the USA Today.

I also describe the population shift in this video.

My colleague John Sumser in a recent article also did a great job of describing the population pyramid. “For the entire history of the human race, with virtually no exceptions. the age distribution of population has had the shape of a pyramid. As people get older, there are fewer of them. The pyramid shape means that there are few old people and lots of young people. The older that people get, the more of them die.”

That population pyramid model lasted for centuries. But as he wrote, “important parts of our world no longer resemble a pyramid. While life expectancy was growing, the average number of people in a family has been declining rapidly...More old people and fewer kids (proportionately) means that the so-called pyramid no longer resembles a pyramid in the US and all of the industrialized world.”

That shift from a people pyramid to a silo means that the bulk of those people not working changed from children to adults. Not only does that imply more Social Security, Medicare, and pension costs, but fewer people working to support a growing dependent population. Likewise the cost of supporting more older people than younger ones has substantial economic implications, $500,000 caring for a senior compared to $125,000 educating a child.

This demographic shift is happening quicker too. In 2000 the U.S. had roughly the same number of children and non-working adults. Since then, the population of non-working adults has grown 27 million while the nation added just 3 million children under 18.

Age isn’t the only factor causing the lower labor participation rate. Men have been leaving the workforce for decades. In 1960, more than 80 percent of men worked. Today just 66.8 percent of men are working. Concurrently, the female participation rate jumped from 36 percent in 1960 to 56 percent in 2010. While the increase is certainly dramatic, lost in the translation is that the female participation rate leveled off in 1995.

The implications for employers are enormous. Shortages of workers moving forward will come in the form of quantity and quality. As challenging as recruitment is today, employers are just experiencing the tip of an iceberg.

April 18, 2011

The nightmare that is plaguing many companies as the economy recovers is the lack of skilled workers. There is no one cause for the shortages but a significant driver is the loss of Baby Boomer brain power. But the good news is that there can be a happy ending.

One company that is doing an exceptional job at managing their aging workforce is the National Rural Electric Co-operative Association (NRECA). I’m very proud to say that NRECA and many of their members have been clients of my company Success Performance Solutions for several years. So I was thrilled today when I turned the page in The Economist and saw their success story about how they are managing their aging workforce. The NRECA story isn’t only about well-deserved recognition but it serves as a model that other companies can use too.

The shortage of skilled worker problem is already acute in many industries like healthcare, aerospace, energy, and even technology. It has been exacerbated by a failure to plan, despite ample warning, about the impact of aging Baby Boomers. The article in The Economist cites The Sloan Centre on Ageing and Work at Boston College survey which found that 40% of employers worry that the ageing of the workforce will have a negative or very negative impact on their business. And yet despite this dismal warning, another survey last year by two British management institutes found that only 14 percent of managers think that their workplaces are prepared to cope with the greying of the workforce.

A significant number of older workers also became collateral damage as a result of how employers managed the recession. Many aging workers were forced to take early retirement while others were told to leave before the door hit them on their behinds. In either case, companies lost not only basic skills required to run their business but all the unwritten knowledge that swirled in and between the heads of veteran workers. Now many companies are finding that replacing one old body with a younger model isn’t very effective when life’s experience and maturity are ignored.

How did NRECA do it? First of all, they recognized that couldn’t change long-term demographic trends. They could however respond differently and more effectively. The NRECA chose to see older workers as part of their modern workforce, not drags on productivity and performance and costs associated with healthcare costs and benefits.

But setting the strategy and implementing well are two different things. After all the literature and Internet are filled with stories about the rigidity, curmudgeon attitude, and poor technology skills of older workers. References abound too how older workers just don’t have the physical ability to meet the physical requirements of many jobs. While that might be true, more jobs these days require more brain than brawn: according to the Urban Institute think tank, 46 percent of jobs in America require little if any physical demand.

And despite Millennials like Facebook CEO Mark Zuckerberg changing the way we communicate, several aging Baby Boomers like Steve Jobs (Apple). Larry Ellison (Oracle), and John Chambers (Cisco) can hardly be dismissed as non-relevant in the world of technology even today. Besides according to a recent study by the Kauffman Foundation, Americans aged 55-64 have launched more businesses than those aged 20-34 in every year since 1996.

But as The Economist author aptly notes, “None of this means that adjusting to an ageing workforce will be easy. Companies will need to rethink the traditional career ladder that linked seniority to pay and power.” They will also have to address the dramatic differences in work-life attitudes between the aging Baby Boomers, the trapped cohort of Generation X, and the emerging Generation Y workers.

The statement that caught the most attention was that companies and people must learn to “treat retirement as a process rather than a sudden event.” That solution seems to be a great fit for both the business that can’t afford to go cold turkey when a skilled Baby Boomer retires and for the Baby Boomer who willingly wants to continue working or is forced to work for financial reasons.

Congratulations NRECA! And for all the other employers who expect to remain in business have no choice but to learn how to deal with a rapidly aging workforce just like NRECA.

March 13, 2011

YouTube last week announced it expects to have its biggest hiring year in 2011, with plans to grow its staff by 30%.

The Google-owned video site has dozens of open positions in all areas, with a high number of them are in advertising sales and customer support.

Google itself announced a few weeks ago that 2011 would be its biggest hiring year ever, surpassing its 2007 hiring record with more than 6,000 new hires.

In contrast AOL, the darling of Wall Street just a decade or so ago, announced it was laying of 20 percent of its workforce or 900 people. That followed a cut of 2,500 employees just about 4 months ago.

The contrast between Google and AOL, as well as quite a few more technology companies, is distinct. It reinforces the volatility of business models, and essentially job markets, in today’s marketplace.

What I find most interesting with this news is that hiring a few hundred employees actually made front page news. Contrast that with just a few decades ago when manufacturers, especially the auto industry, announced employee call backs in the tens of thousands following a recession.

Employees waiting today for their old jobs will hear only the call of disappointment. Many of those jobs are gone for good. Some were lost to outsourcing. Just as many jobs were eliminated thanks to automation. Assembly line jobs have been replaced by robots and computers. Many of the people who used to assemble products and now looking for work but don't have the specialized skills to perform the new jobs. New jobs require strong technical or professional skills and some level of post-secondary education.

For instance, one of the largest hiring sprees is being conducted by Accenture. They are hiring 45,000 employees. Most of the job openings require at least a four-year degree. The same thing with Deloitte, which is hiring over 11,000 people this year. The Big Three – GM, Ford, and Chrysler – once ruled the roost when it came to hiring and offering a middle class lifestyle with only a high school degree. As recently as the 1970s, manufacturers recalled tens of thousands of employees. No more. The bar for employment has been permanently raised.

I’d be remiss if I excluded companies offering entry-level jobs from the conversation. In fact, businesses are hiring workers who don’t have college degrees. Marriott plans to hire 5,400 people, while Wegmans and Publix are hiring 1,500 and 1,300 respectively. But the numbers pale in comparison to Accenture and Deloitte. So does the pay… and the opportunity for a middle class lifestyle.

Our job market has undergone a major structural shift. The writing was on the wall for years. For many employers and employees, today is the tomorrow they hoped would never come. The odd couple of skilled worker shortages and high employment will maintain their contentious relationship for some time.

March 08, 2011

Last month's gain of 192,000 net new jobs indicated that job creation might finally be on the uptick. The unemployment rate -down to 8.9 percent - has now declined nearly a full percentage point since November 2010, the steepest drop over a three-month span since 1983.

While that's good news, Elaine Chao, former Secretary of Labor, reminded participants attending the 2011 Human Capital Institute Summit, that we actually need 200,000 net new jobs per month just to keep up with our growing population. (That's not so bad compared to China, where they need 25 million net new jobs per year just to keep up with their growing population.)

New jobs and a falling unemployment rate, despite what the press and political pundits might have you beleive, aren't the only things that matters when we look toward an economic recovery.

The labor participation is still quite low. According to Chao, we're only at 62.4 percent, the lowest it has been in 25 years. Chao describes the reason for the low participation as a general lack of confidence that people currently have around their ability to find new jobs.

Chao also confirmed her belief that American workers still have high education levels and strong skills sets. It's just that we don't have enough of these skilled, educated workers to fill jobs in the fastest growth areas - Nanotechnology, Geospacial Technology, Life Sciences, and Healthcare - that will plague employers for years to come.

Up until this point in her presentation, there wasn't much to argue with - facts are facts.

Then the tide turned for me. It was her example of "one of the few great remaining training grounds" - the fast food industry. I'm not disputing that the industry isn't doing a good job. But I find it depressing that she felt their efforts warranted such attention because the fast food training curriculum must cover these basics:

Punctuality is important.

Personal hygiene is important.

Anger management/conflict resolution.

When the boss tells you something, it isn't a suggestion!

Is training workers to be punctual and clean something so compelling that a former Secretary of Labor feels it's worthy of commendation? Has our education and training systems fallen so far that timeliness and cleanliness are significant achievements? When we're talking about finding a way to ramp up the skills of workers so that we can compete effectively in a changing global marketplace, shouldn't we be recognizing companies or industries that excel at training workers to think creativity, solve complex problems, manage virtual teams, or deliver outstanding customer service?

The state of our workforce may be improving but if training punctuality and personal hygiene is the best example of good job training we can offer, we will be seriously outmanned in our efforts to compete in a global economy.

February 19, 2011

Modest growth in the economy has employers seeking skilled workers to stress out. Not only is finding candidates with the experience and/or skills to do the job comparable to finding the proverbial needle in the haystack in many industries, but a lack of employee mobility has slapped handcuffs on the few available skilled workers.

Posting jobs to online job boards such as Monster and CareerBuilder is a popular technique to reach a large number of potential employees quickly. Starting a career page on the company website requires little cost or effort. Getting the word out about a job opening is no longer a big deal for most businesses.

Online career sites also make it easier for the jobseeker to find a job that fits his skill set just about anywhere whether it is local or hundreds of miles away. Getting candidates to apply for a job, especially with high unemployment, using online recruiting seems like a marriage made in heaven.

But as many companies have learned the hard way, posting a job online can inundate a company with dozens, if not hundreds, of applicants - many of them unqualified, an effect I've called the resu-mess. Many employers are shifting away from job boards and putting more effort in working connections on networking sites such as LinkedIN. More aggressive recruiters – both internal and external – are even seeking out employed workers and poaching these passive, but talented, candidates from competitors.

Unfortunately regardless of the recruiting source, mobility – or the lack of it – is putting a significant crimp into the talent pipeline.

The current housing market is one factor putting a hitch in sourcing talented candidates to fill skilled jobs. In order to relocate, a potential employee may need to sell or arrange to rent their home if they accept the new job. With so many potential workers owning “underwater” mortgages, loans that are worth less than the property is worth, a company’s candidate might be qualified but unavailable. Renting too might not be a option. Finding tenants who can afford the rent to cover the mortgage are few and far between these days.

There is second potential hurdle facing employers seeking hard-to-find skilled workers. It’s the “blended” family. Remember the Brady Bunch? Just a few decades ago, the step-family was an exception. Today over four out of every ten American adults have at least one step relative in their household. There are all sorts of combinations that might fit the modern family, but the most typical is the couple who each have children from previous relationships. Moving the family to another area may mean getting the blessing of not one but two former spouses or family members with whom they share parenting responsibilities. Changing schools, sometimes even just a few miles away, and the status of state specific college savings funds, precludes relocation. In addition, many households today rely on dual incomes. The relocation of one spouse for a job means the other spouse may be left hunting for a job.

The third hurdle facing employers is the increasing number of workers that find themselves caring for parents. With people living longer, it is possible that a qualified candidate might be the caregiver for four aging parents. That is certainly the case for many working Baby Boomers. Perhaps these aging parents live in the same town or just up the street and depend on their adult children just for occasional help with groceries, snow removal, or lawn care. But time marches on and many candidates may not be comfortable shirking what they feel is an obligation to be nearby when their parent(s) might need them. If the parents are already in an elder care facility, and the children have confidence in the facility or other siblings in the area, this concern is reduced. Of course, it is possible the candidate could move the parents with them, but that too can be troublesome and expensive. Step-parents also can hinder employees from relocating. According to the Pew Research Center study, 56 percent of adults feel very obligated to help out a stepparent. That means if all the parents are alive, a step-couple could have 8 aging parents to care for.

The Perfect Labor Storm has many facets converging on the workplace. A shortage of skilled workers is just one of them. Finding qualified candidates who have the experience, skills, and mobility is becoming increasingly more difficult. Thanks to a widespread shortage of qualified candidates in many industries, recruiting employees has its inherent challenges. Other factors like mortgages, step families, child custody and elder care hinder many candidates from accepting jobs in new places. With the economy heating up, finding qualified candidates is only the beginning of the challenge facing employers. Unlocking the many handcuffs that might be holding a limited supply of skilled workers hostage will make recruitment even more difficult in the coming months.

January 18, 2011

The most recent turnover information from the U.S. Bureau of Labor Statistics is very telling. As the economy continues to run at a new normal, employers need to be aware of a wide range of factors waiting to sabotage productivity.

One of the most startling stories is the proportion of Quits to Layoffs & Discharges. Back in October of 2009, a full 50% of private sector separations were due to Layoffs & Discharges, with 42% attributed to Quits. For October 2010, those figures had flipped almost completely: 50% of separations where due to Quits and 43% were due to Layoffs & Discharges. In other words, the exodus has begun. People know they have new opportunities, and they are leaving the employers who have kept them captive for the last few years.

Exhaustion — Many companies took advantage of the economy to preemptively cut labor costs by reducing staff more dramatically than business required. In many cases across the country, remaining employees were left with a greater workload than before, with fewer acknowledgments of the need for work-life balance. In addition, fear of losing a job during a recession drove many employees to be less assertive in insisting upon reasonable work limits.

Pay & Disillusionment — Citing reduced profits, companies around the country froze pay rates and halted promotions. While in many cases these actions kept companies afloat, it was the rare organization that asserted with management the need to ensure employees continued to be recognized and commended for their work. In many cases, the tenor of management during these rough years has seemed more corrective than appreciative.

Retirement — In the years leading up to the recession, fears abounded regarding an impending shortage of qualified workers. But better health, longer lives, and less physically demanding jobs plus a major hit to retirement funds thanks to the recession have delayed the much anticipated mass exodus from the workplace. But improvements in the stock market as well as an improved job market for family members (spouses and children) that Baby Boomers have been supporting, individuals who delayed leaving work will again start to plan to retire soon, leaving gaps in staff as well as in knowledge.

Return-to-Home Parents — One surprise group of “heroes” who kept families afloat during the recession was the At-Home Parents set. Many at-home moms and dads dusted off their resumes and returned to the workforce as their spouses and partners were laid off or were forced to accept reduced hours or salaries. Some of these newly re-engaged employees may happily remain in the workforce going forward. However, in many cases, before the recession these families considered a number of factors — salary being only one of many — to decide which adult would remain at home with the children, and as the original working spouse or partner becomes able to support the family again, the original at-home parent may return to his or her preferred place of work: the home.

The coming return to a solid economy is positive, without question. The unemployment rate will start to go back down as jobs become available, and then the upward spiral — the antithesis of the downward spiral of the last couple of years — will begin. Those who are employed and who are more secure will spend more money, creating greater demand, thus prompting companies to produce more products and provide more services. The greater work volume will require more staff, driving up job openings, creating more employment opportunities and more security for those who are employed. And yet, companies that have taken advantage of their employees over the past few years should be concerned. Their challenges — in the form of voluntary turnover — are only just beginning.

December 29, 2010

Despite widely differing stories on job creation and economic growth, the U.S. and India share a common problem: skilled worker shortages.

The Indian economy is growing at a 9 percent clip. The U.S. growth hovers around 2.5 to 3.0 percent.

The number of unemployed in the U.S. remains high, reportedly in the neighborhood of 15 million people. If you add the underemployed and those who stopped looking, that number according to some estimates exceeds 25 million.

The shared problem is a shortage of skilled workers. Despite near double-digit unemployment, U.S. employers complain about a lack of qualified candidates. In India, about 75% of new jobs require additional vocational training. If not addressed properly, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) warns of a slowdown in the country's economic growth. Likewise, by 2012, there will be a 3 million skilled worker shortfall in our nation, according to the U.S. Department of Labor.

Because the year 2011 is likely to be a boom for skilled worker engaged in IT biotechnology and services sectors, salaries in India are expected to rise 30 to 40 percent against the 15% in 2010 due to high demand in India. For the U.S. the demand for skilled workers also will increase which means that salaries will rise despite an economy improving slowly and high joblessness. The salary increases however will be much more modest.